DC blends U.S. chutzpah with German resolve

Due next spring as a 2001 model, DaimlerChrysler's new PT Cruiser is difficult to label.

Based on Chrysler's Neon car platform, it also has attributes of a minivan and sport/utility vehicle (SUV). DC has chosen to call it a truck because its small size and 2.4L 4-cyl. engine can boost the corporate average fuel economy of DC's gas-guzzling truck fleet, but it could just as easily be classified a car.

The only element of the PT Cruiser on which everyone seems to agree is the fact that it's expected to be an unqualified hit.

The same can be said of the new Daimler Chrysler AG, which blends the chutzpah of the former Chrysler Corp. with the refined discipline of the erst-while Daimler-Benz: It's hard to label but appears destined for success.

Wall Street and U.S. investors still don't know what to make of this new global hybrid, and they're unhappy with its tight-lipped German accounting methods. That's led to disappointing stock prices and sometimes brutal selloffs.

But American consumers love Chrysler's trucks and virtually every single product currently offered in Mercedes-Benz showrooms. Forecasters are bullish about its sales and market share prospects through 2004 and beyond, hence we rate it with a fully inflated tire.

The stunning retro-style PT Cruiser is just one of myriad new products DC will offer in a coming new- product blitz. Most will deliver a tantalizing combination of style and utility. Besides its show-stopping good looks, for instance, the PT Cruiser promises to be affordable to young buyers and offer a roomy, highly practical minivan-like interior.

The 2000 Dakota Quad Cab follows the same theme. It is only the second crew-cab compact pickup to be introduced in the U.S., enabling DC to capitalize on the trail already blazed by the well-received Nissan Frontier Crew Cab. Like the Nissan, the Dakota has four regular front-hinged doors in its extended cab, not the more common opposing "suicide door" arrangement.

On the Mercedes side, DC continues to deliver a seemingly unending stream of dream cars for a growing army of self indulgent baby boomers. The latest crop for 2000 includes the smaller, new-generation S-Class sedan, a new flagship CL coupe plus a 275-hp, V-8 powered CLK that joins the current V-6 coupe and convertible lineup.

Apparently noticing that today's SUV buyers just can't find enough ways to spend their money, Mercedes also is introducing the ML55, a $66,000 hot-rod AMG version of its popular M-class powered by a 349-hp 5.4L V-8. Mercedes' "entry-level" C-Class cars also get the significant technological upgrade of standard stability control. Coming soon is the next-generation C-Class, which promises to be roomier and resemble the swoopy modern look of the new S-Class.

Mercedes has done exceptionally well in recent years by offering a greater variety of innovative, more- affordable products priced the same as or below previous models. Yet it still has managed to maintain the industry's highest resale values and its image as the world's premier luxury brand.

Despite some concerns about culture clashes and a possible dilution of DC's strong brand images, analysts say the company's fundamentals look very sound for the next five years, and predict rising market share even while key DC market strongholds such as light trucks, minivans and luxury vehicles grow more competitive.

For instance, industry insiders say that all Mercedes products will ride on totally exclusive Mercedes plat-forms for at least the next five years to en-sure there is no dilution of its famous "rolling bank vault" ride. Other less brand-sensitive technologies relating to safety, emissions, communications and other areas are expected to be widely shared, though.

Standard & Poor's DRI and Ward's predict DC's U.S. market share will be a healthy 16.8% with sales of 2,775,500 vehicles in the 1999 calendar year, rising to 17% in 2004 on slightly lower sales of 2,724,200.

Chris Cedergren, an analyst at Thousand Oaks, CA-based Nextrend Inc., is even more bullish on DC's market growth potential, predicting its share to rise by a full point or more in the next five years.

Like few other auto-makers, DC understands what's driving the automotive marketplace today, Mr. Cedergren says. It knows how to develop products that evoke passion and tug at the emotional heart strings of not only baby boomers but also the younger generations of buyers following them. "That's absolutely critical," he says.

DC reinforced this outlook last month at the Frankfurt Motor Show when it exhibited a spate of strong new products, interesting concept cars and then rolled out a $49 billion new product program aimed at introducing 64 completely new passenger and commercial vehicles before the year 2004.

It also reported record sales worldwide for all of its passenger car brands through August and a 12% rise in revenues. This led Co-Chairmen Robert J. Eaton and Juergen E. Schrempp to predict 1999 revenues to be $7 billion higher (to $155 billion) than originally forecast.

So much for the paralysis supposedly gripping the company as it struggles to integrate the very different cultures of the former Chrysler and Daimler-Benz.

Even so, DC still has plenty of wrinkles to iron out during the next five years. Besides the very sticky business of merging American and German cultures, bolstering its stock price and convincing the world that DC is a "global company" rather than a mere acquisition of an American company by a German one, DC faces some serious problems. Among them:

Car sales. Trucks are humming but Chrysler's cars are a perennial weakness. It scored points with critics by reviving moribund Intrepid sales with a successful re-launch, but the almost brand-new Neon is struggling. Other cars are selling only with hefty incentives.

After inventing the minivan market in 1984, DC's overwhelming dominance is being seriously challenged, most notably by the Honda Odyssey. Furthermore, Chrysler seems to have been caught napping just as these competitors are hitting their stride with interesting new features such as seats that can fold down into the rear load floor and video entertainment systems for passengers.

M-Class quality problems. Mercedes officials continue to try to underplay the quality problems plaguing its first-ever SUV, but product glitches have seriously hurt the M-Class's ranking in J.D. Power quality surveys and have riled Mercedes loyalists. Sales also briefly nose-dived last summer for the first time, although they since have recovered.